Non-compliance is the procurement professional’s friend. Discuss.

Regular readers will know that one of the beauties of the site is nothing to do with me. It is the range, wit, insight and at times shear madness of the comments we receive. You may also know that some prefer to be anonymous – we’re fine with that, as long as standards of decency and laws of libel are observed.

It is even rumoured that some people comment both under their own names and with a nom-de-plume; this gives them the ability to start arguments with themselves, something which I frequently do in the privacy of my own bedroom. Now in many cases, we know the identity of these anonymous friends; but in some we don’t. And one of those is the legendary “Bitter and Twisted”.

The other day, when we wrote about procurement’s desire to be a profession and why we are miles away from that, he made a typically acerbic and obtuse comment (and that’s a compliment by the way).

the problem is the dirgey drudgery of compliance, contracts, and KPIs, etc. and the flabby corpse of predigested thinking suffocating curiosity and experimentation.

all compliance and no maverick spend makes jack a dull boy…

But this made me think about something I’ve said in presentations before, but haven’t written about here, and is right in line with B&T (as his / her friends call him / her). I can sum it up like this.

Non-compliance is the procurement professional’s friend.

I’d stress here we’re talking about internal stakeholder compliance, not compliance of suppliers to what they’ve agreed to do, or deliver. While that is another great topic, it is a little clearer in that suppliers should comply, full stop – unless we agree otherwise.

But internal compliance is a more complex issue. And our statement may seem counter-intuitive – after all, practitioners spend large amounts of time, energy and effort trying to “manage” compliance. And by manage, we almost always mean “increase”. Getting line managers, budget holders and users to do what we want is high on the procurement list of priorities in most organisations. We want them to buy through our formal channels and processes; use our preferred suppliers and approved contracts; or to participate in structured evaluation or contract management processes. All of those are aspects of compliance, although compliance to preferred suppliers is probably the number one priority of these for most of us.

And that is the area that I’m particularly interested in - use of preferred, approved or even mandated suppliers and contracts, although many of the subsequent comments here apply to non-compliance of any kind. When we find that “our” contract or supplier is not being used, we tend to get annoyed, and blame the stakeholders.

They don’t know what they’re doing! They’re stupid! They’re deliberately subverting our processes because they feel we’re taking their freedom away! They want to use another supplier because they’re taking bribes!

Now of course, on occasion all of these will turn out to be true. While it was a procurement person rather than a non-procurement “user”, one might imagine that the Sainsbury’s potato buyer would have strongly resisted any move to get him to stop using has favoured supplier (who paid him millions in back-handers). I’ve had first-hand experience of property and IT colleagues with “favourite” suppliers, where corruption was eventually shown.

But, notwithstanding all that, there’s an opportunity to turn non-compliance into a positive, and improve both procurement performance and perhaps reduce stress levels. Look at non-compliance as your friend, and think about what it is telling you. Because if you’re seeing non-compliance, there is always a reason.

Voices (4)

Hello Peter
The time is coming when the Sensei may dissappear from the pages of this wonderful publication and a new “normal” person arrive 🙂 we shall see.

Anyway as one of your anonymous contributors (although you do know who I am) I would, as I often do, like to share an experience where the refusal of a stakeholder to comply with a proposed agreement/contract that I had instigated was for a positive reason and one that I learnt a lesson from.

Some years ago after conducting a European wide tender for some packaging material with a total spend of about $30m I made several awards to companies based on all the right measures and analysis from a tender which included an award for business to one of our sites that was in the process of rellocating. When I say “in the process” it was to take place 12 months down the line. At the time the Factory Manager had made a blanket statement that no supplier changes would be allowed to take place to ensure the stability of sustained supply, despite this tender saving the site $800k on a spend of $3.5m.

Now always loving a challenge I arranged a meeting with him and his senior team and went to the factory which was in central Europe. I had been allocated a two hour session which was pretty amazing stuff and I had done my homework and was fully prepared for the session. I presented well (not blowing my trumpet I just mean everything went as planned and I was able to answer all questions) and they held a meeting together while I was out of the room, after which the Factory Manager met with me and gave me permission to instigate the change stating “you are the only Buyer that will be allowed to do this”.
WOW my head was larger than ever – I was well chuffed and almost flew home without the use of a plane. That may sound rediculous but believe me this was a serious accomplishment
So I set everything up with the supplier and then put the contacts together with the factory and sat back and wallowed in regailing the story that I got permission where others hadn’t
At the end of what should have been the first quarter of supply I checked in with the factory (I had supply in 15 – 20 factories so tended to focus on each one once per quarter) and discovered that although supply had started there was no further supply from my new supplier and that they had stuck, or gone back to, the previous incumbent..
I put on my parts, and stomped my feet and reminded all who would listen that I had permission for this and we had actually started. I demanded to know what was going on and who had authorised this. And went on to remind them of our internal rules and compliance requirements when it came to suppliers.
I was contacted shortly after this rant by the sites Financial Controller. And after about four minutes of discussion I felt about 2mm tall…………….

I had made a fundamental error, which okay no one else had immediately picked up probably because I was so vocal in how good this deal was, and that error was that I had been using the wrong currency/currency exchange and as a consequence the deal that I had thought was so good was actually cost negative.
So the internal compliance was that factories had to work to the contracts that were put in place by the Buyer. This factory worked outside that and so were non compliant but they did the right thing. In this case they actually “saved my bacon” because we do not see huge PPV (Purchasing Price Variance) losses because of my error.
I had to smooth things over with the new supplier – eat humble pie – apologise to the factory – grovel to my line manager – and learn a valuable lesson
Collecting and collating the correct data at the start of an event and ensuring that is checked thorougly is absolutely paramount.
I also learnt not to be such a cocky big head and just maybe not to gloat so much to my peers!!

Nothing related to compliance, I’m afraid, but here’s a similar story.

A long time ago, to a procurement panel, comprising a number of extremely senior Execs (including a subsidiary company Chairman!), I presented a draft ‘tender evaluation report’ which I’d finished editing at 3am that morning. My own edits included the the words “lets hope the bastards swallow this crap”, intended as a comment back to the senior procurement manager. Presumably, because I was still half-asleep and in a rush, I forgot to check that these words has been taken out before printing and presenting it to them. Needless to say, when they read these words, I convinced the panel that I was referring to the bidders and the aggressive deal they would ultimately have to accept, but I think they knew (and their faces told me so) that I was actually referring to the procurement panel members…

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